 |
Should I Sell, or Should I Rent
My House???
There are many factors to consider when making
this choice. Many of them have to do with the owner's current and
perceived future needs.
- Do I need cash flow to cover living expenses?
- Do I need a lump sum to make a down payment
in a new investment?
- Is the property capable of earning a decent
return?
- Can I improve my yield if I sell and buy other
real estate investments?
- Is the annual property appreciation the key
reason I own this real estate?
- Does my home require high maintenance to sustain
the current property value?
The agents at Rancho Mesa Properties are not financial
planners, but to the extent we as real estate agents can help you
consider the value of your property, we are ready to help you evaluate
your possibilities and plan for your future.
Capitalization Rate:
Rent vs. Sell House
The Capitalization
Rate calculator gives a quick read on the economic
viability of renting out, rather than selling your house. It
divides the net operating income (from renting the property)
by the expected sale price of the house, giving you an investment
yield. If this yield, also called a "capitalization rate," is
less than what the long-term Treasury securities are currently
yielding (around 5.7%) you're probably be better off selling
your house.
Here are some tips on what to include at each
data entry point.
- EXPECTED MONTHLY RENT: See
your Rancho Mesa Properties agent for current rental rates
in your area.
- ANNUAL TAXES: Review your
property taxes for the major portion of this value. Remember,
once you no longer live at the property, you will lose the home
owner exemption, a 7% discount on your property taxes. Also,
San Diego City levies an annual $55 per unit business tax on
each rental property.
- OTHER ESTIMATED ANNUAL COSTS: This
data entry field is for capital improvements and major repairs.
Newer properties tend to have very minimal expenses in this area
compared to properties that are 15 years and older. If the owner
holds a rental property for a long period of time, they will
discover that, on average, 10% of their annual rent should be
allocated to this category of expenditures.
- MONTHLY FEES: Include your
gardener, landscaper, water, energy, home owner association and
property management fees in this data field. Anything that you
offer the tenant as a benefit or are committed to pay as an owner
on a monthly, or quarterly, basis should also be included.
- LIKELY SALE PRICE OF YOUR HOME: See
your Rancho Mesa Property agent for current property values in
the area of your property.
Note: This calculator has
no provision for real estate closing costs, which are incurred
when you sell your house. To add in this significant factor, subtract
approximately 7% from your LIKELY SALE PRICE. When Rancho Mesa
Properties manages your property there is no real estate closing
costs or re-rental fee when it is rented to a new tenant.
Capitalization
Rate calculator
|
